The latest on California politics and government

December 13, 2010

California's state and local governments provide billions of dollars in subsidies to corporations, both directly and through tax loopholes, but does a poor job of revealing recipients, according to Good Jobs First, a Washington-based coalition of liberal organizations.

The group gives California a D-minus grade on disclosure of corporate subsidies, saying that not knowing who gets them makes it unduly difficult to judge how effective they have been in meeting their stated goals of improving economic activity and job creation.

"California can't afford spending big dollars on subsidies without tracking where they go and whether they deliver bang for the buck," said Emily Rusch, director of the California Public Interest Research Group, an affiliate of Good Jobs First. "When public dollars go to private businesses, we need the highest level of transparency."

Corruption-prone Illinois unexpectedly tops all other states in subsidy transparency with a B grade, while California's D-minus rates 29th place, tied with Maine.

The largest state subsidy programs tend to be tax loopholes and there's virtually no information available, at least online, about who receives their benefits, Good Jobs First said. It cited the $1.1 billion a year corporate tax credit for research and development, the $333 million property and corporate tax break for firms locating in "enterprise zones" and the new $100 million tax credit for in-state film and television production as examples of public opacity.

The report on California also cites, in its pitch for more disclosure, the 2001 resignation of San Diego City Councilwoman Valerie Stallings after it was revealed that she had received unreported gifts from John Moores, owner of the San Diego Padres baseball team. In 1998, the city agreed to provide 70 percent of the financing, through diversion of city hotel tax funds, for a new baseball park for the team.

"With states being forced to make painful budget decisions, taxpayers expect economic development spending to be fair and transparent," said Good Jobs First's executive director, Greg LeRoy. "Claims that sunshine would hurt a state's business climate have been discredited, trumped by people's rising expectations about government information being online."

State tax subsidies are expected to come under increased scrutiny as incoming Gov. Jerry Brown wrestles with a multibillion-dollar state budget deficit. Although the state reports on "tax expenditures," as they are called, in the aggregate and they amount to tens of billions of dollars a year, there is little scrutiny whether the corporate tax breaks are justified in economic terms.

The enterprise zone program has been harshly criticized as ineffective and the Legislature's budget analyst, Mac Taylor, has suggested that closing ineffective loopholes would help balance the budget, offsetting spending cuts or raises in general taxes.